They want to know the factors that might cause such people to evade their
taxes, and so do I, though with much different motives, and so I took a peek
at the report. Here are some bits that stood out to me:

Most taxpayers believe tax laws are unfair.

Only 15 percent of both groups agreed or strongly agreed that the tax laws
are fair. Rather, most taxpayers believe that:

Large businesses have loopholes to reduce their taxes that smaller
businesses do not have;

The wealthy have ways of minimizing their taxes that are not available to
the average taxpayer;

Not everyone pays his or her fair share; and

The federal tax laws are unfair

Those in the low-compliance group were more likely to participate in local
organizations.

Among respondents who belong to local organizations, those in the
low-compliance group were more likely to report that they usually
participate. This was true for various organizations identified by the
survey, including local business organizations (50 percent from the
low-compliance group usually participate
vs. 30 percent from
the high-compliance group), local trade, labor, or occupational organizations
(40 vs. 24 percent),
and local civic, community, or fraternal organizations (67
vs. 47 percent).
Thus, active participation in these groups appears to be negatively
correlated with tax compliance, possibly promoting social noncompliance in
terms of the typology. Perhaps those with a closer connection to local groups
feel a weaker connection to the federal government, and a weaker obligation
to comply with federal tax laws. They may also chose to associate with those
who hold similarly negative views about the federal government and tax
compliance, which reinforced their own views

Those in the low-compliance group were more likely to report that other
members of local organizations view tax laws and the
IRS
negatively.

Those in the low-compliance group were more likely than those in the
high-compliance group to report that other members of local business
organizations believe tax laws are unfair (48 percent of the low-compliance
group vs. 28 percent
of the high-compliance group) or that the
IRS
treats taxpayers unfairly (37
vs. 21 percent).
They were more likely to report that other members of local trade, labor and
occupational organizations believe tax laws are unfair (42
vs. 38 percent) or
that the
IRS
treats taxpayers unfairly (46
vs. 28 percent).
They were also more likely to report that other members of local civic,
community, and fraternal organizations believe the tax laws are unfair (50
vs. 23 percent) or
that the
IRS
treats taxpayers unfairly (36
vs. 18 percent).
Participation in these organizations may have allowed taxpayers to learn that
noncompliance is an acceptable norm among other participants, or perhaps they
assumed that other participants shared their negative views. In any event,
the differences in the responses to these questions by members of the high-
and low-compliance groups may suggest that a person’s perception about
whether other participants in local organizations feel the tax law or the
IRS is
fair has an effect on their own compliance behavior (e.g., social and
symbolic noncompliance), perhaps eroding tax morale.

Another thing they noted was that “Surprisingly, those in the low-compliance
group were also more likely than those in the high-compliance group to believe
that the
IRS
detects and penalizes noncompliance.” This is another data point that suggests
that deterrence via tax enforcement is not particularly effective, and that
fear of
IRS
reprisals is not the prime motivator keeping people from refusing to pay.

Also surprising is that people in the high-compliance group were more
likely than those in the low-compliance group to report that they felt their
business competitors were not tax compliant. This upsets the theory that
people “flock” in their tax compliance behavior — tending to behave in the way
they believe their peers are behaving.

[T]he results of both surveys [they also did a study that divided people up
geographically into low- and high-compliance communities] associate distrust
of the national government and the
IRS
with the low-compliance groups and communities. For example, respondents from
the low-compliance group were more likely to report that the government is
too big and wastes tax dollars, that tax laws are unfair, and that the
IRS is
unfair (e.g., often believing the
IRS is
more concerned with collecting as much as possible instead of the correct
amount, and indicating less satisfaction with
IRS
services).

The results of both surveys suggest that norms and distrust of the national
government, the law, and the
IRS
may promote noncompliance. Respondents from both the low-compliance groups
and from low-compliance communities held negative views about government and
the IRS
and were more likely to participate in local organizations. They were also
more likely to believe that other members of those organizations held
similarly negative views, which appeared to reinforce their own views, though
they generally professed that noncompliance was morally wrong. In other
words, they affiliated with others who reinforced noncompliance norms at the
local level, and probably feel a closer connection to a local collective than
to the national collective. In terms of the typology discussed above [which
divides non-compliant taxpayers into several categories based on the causes
or motivations for their noncompliance], this tendency to affiliate where
distrust of government is the norm may be a form of social and symbolic
noncompliance.

The authors say that “social and symbolic” noncompliance are emerging as “the
primary types of noncompliance among small businesses.” These are defined as:

Social

Acted in accordance with social norms and peer behavior

Symbolic

Perceived the law or the IRS as unfair

…and are in contrast to a motive they call “Asocial” (“motivated by economic
gain”) and a variety of other motives that have to do with ignorance of the
law, laziness, difficulty following complex tax laws, or acting on advice from
crafty tax professionals. The “Symbolic” category amounts to tax
resistance, and so it is interesting to see that the
IRS is
coming to believe that much of what it has traditionally categorized as
selfish, “asocial” tax evasion, is really motivated by feelings of dislike for
the government and how it spends tax money (only about 6–8% of respondents
believe “the federal government spends tax dollars wisely”).

Interestingly, people in the low-compliance group were more likely to
report that everyone should correctly report all of their income — 97%! (And
they were just as likely to report that “I feel a moral obligation to
correctly report all of my income” — 96%) That should give you some skepticism
about the value of such survey questions. The report notes that “the
low-compliance group may have answered these questions aspirationally (e.g.,
they may not be living up to their aspirations because tax morale does not
drive their tax compliance behavior) or defensively, to avoid making an
admission.”

One caveat: the people who conducted the survey divided the respondents into
“high-compliance” and “low-compliance” categories, but they did so not by
measuring actual compliance, but by using
“IRS tax
compliance estimates to identify sole proprietors most likely to have high or
low levels of reporting compliance.” These estimates are based on the
taxpayer’s “examination activity code,” their “total gross receipts” and
their “total positive income.”

[I]t is difficult to measure actual compliance with perfect accuracy.
Taxpayers are not likely to confess any noncompliance in response to a
survey, and even detailed audits conducted by the
IRS’s
National Research Program (NRP) are
likely to contain errors. Even assuming that
NRP
audit results, as adjusted by
IRS
researchers, reflect actual compliance, the audit itself has an effect on the
taxpayer’s attitude about the tax system, potentially biasing the taxpayer’s
response to any subsequent survey. Thus,
TAS
decided not to survey taxpayers who had been subject to an
NRP
audit. While surveying taxpayers immediately before they were subject to an
NRP
audit might have been more productive,
TAS
deemed it overly deceptive. Thus,
TAS opted
to rely on DIF
scores as an imperfect, but acceptable, measure of actual compliance.

There’s a possibility that the way they divided people up has biased the
results, making some of their conclusions logically circular. And also, you
should keep in mind that the “low-compliance” group in this survey is not “a
group of people all of whom are less tax compliant” but “a group of people in
which the
IRS
believes you are more likely to find individuals who are less tax compliant.”

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